On money

Your tax preparer is right next door, in Bombay

By HELEN HUNTLEY
Published August 31, 2003

Some day your income tax return might be prepared by an accountant in India. No, I'm not kidding.

The trend to outsourcing now includes tax return preparation.

"The industry is facing a challenge because tax returns continue to increase year in and year out and there's not a heavy supply of new CPAs coming in," said Mike Sabbatis, vice president of sales and marketing for CCH Inc., which has added outsourcing to the services it provides tax professionals.

Companies such as CCH of Riverwoods, Ill., SurePrep of Newport Beach, Calif., and Outsource Partners International of New York act as intermediaries between U.S. accounting firms looking for help and foreign accountants willing to do the work.

The U.S. firm still interviews the client and collects all the information, which is encrypted and transmitted electronically to a secure server that the foreign accountant can access. Client forms such as W2s and 1099s are scanned for electronic transmission. The foreign accountant organizes the documents and prepares the return using the same software the U.S. accountant uses. The U.S. accountant reviews the work and is responsible for its accuracy.

"We'd send it off at night and it would be back the next morning. While we were sleeping, they were working," Lake City CPA David Brewer said. He said his firm, Odom, Moses & Co., used SurePrep for about 200 of the 2,000 tax returns it prepared this past tax season. Next year, the number will go up.

Brewer said outsourcing works well for clients who use financial software to keep records, but not for those who walk into his office with a box full of papers. "It's not worth scanning 5,000 receipts."

Outsourcing costs the U.S. accountant $50 to $150 per return, usually less than it would cost to do the same work in-house. But the real appeal to many accountants is the faster turnaround time. Brewer said he cannot find enough qualified temporary help during tax season.

Whether CPA firms tell their clients about outsourcing is up to them. Some see disclosure as unnecessary since they retain responsibility for the accuracy of the return. Some are concerned about client acceptance.

That was demonstrated when I sought to interview some Tampa Bay area CPAs who use Indian outsourcing. "Our clients closest to St. Petersburg decline the opportunity to be interviewed," said Brett Wier, vice president of sales and marketing for SurePrep.

Sabbatis said the outsourcing industry handled only about 25,000 returns this past tax season, but he expects the number will be 100,000 next year and grow dramatically after that.

"It's a matter of time before this is an accepted way of doing business for an accounting firm," SurePrep president David Wyle predicted.

Q. I would like to buy a 529 education savings plan for a grandchild who lives in another state. How do I decide which plan is best?

First, check out the plan or plans available in the state where your grandchild lives. Some states offer incentives to residents who invest in their plans. State income taxes are common. Some states, including Minnesota, Michigan, Louisiana, Maine and Rhode Island, offer matching grants, although they are usually restricted based on family income.

Once you have the scoop on the home state plans, compare them to what is available in other states, including Florida. You can find comparison charts on the Internet at www.savingforcollege.com and www.529directory.com Some plans, such as the Florida Prepaid College Plan, have age and residency restrictions, while others, such as the Florida College Investment Plan, are wide open. Points to consider include fees, flexibility, investment options and investment manager. You can look at the investment track record for older programs, but some, including Florida's investment plan, are too new to evaluate their performance.

Q. How can I find out the names of the officers of a limited liability company?

The names of officers and directors are part of the annual report that Florida companies file with the Florida Department of State. You can search online for free (ccfcorp.dos.state.fl.us) or call (850) 488-9000 in Tallahassee.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.